How good policies help keep rice price right

While the price for most food items keeps spiralling, rice is still in the comfortable zone for low-income consumers who depend on rice for daily calorie intake. This year, rice prices have stayed stable, and even dropped by Tk4-5 per kilogram for most varieties.

Food inflation suddenly surged to a 12-year high of 12.54% in August from well below 10% in the month before amid soaring prices of most-eaten items in every meal with rice like egg, potato, onion and green chilli. The index slightly fell in September but not enough to be a relief to consumers.

Prices of eggs, potatoes and onions defied all actions of the government — fixed prices, market drives and import decisions. Prices of items like sugar and soybean oil remained high too.

In the midst of it, the farmers once again appeared as saviours as they did by continuing production during the pandemic. Rice remains the only exception as good harvest in consecutive paddy seasons, supported by a smooth supply of inputs, helped the government build a safe buffer stock of rice and continue its subsidised rice scheme for one crore family cardholders every month.

Good policies and their proper implementation also came in handy in times of crisis. The strict anti-hoarding law passed in April and the import decisions taken in advance helped the market by keeping the curve flat, economists and traders think.

All of these factors played crucial roles in keeping the rice market surprisingly stable at a time when global rice prices surged to a 12-year high amid limited supplies in Asia due to a number of reasons — India's rice export ban, adverse weather conditions and rice farmers in Thailand and Indonesia switching to other crops.

To check food inflation, the Philippines capped rice prices last month to protect consumers from rice-fuelled food inflation. Bangladesh, however, remains shielded from any immediate pressure from imports amid the persisting dollar crunch.

Agricultural economist Dr Jahangir Alam Khan told The Business Standard, "Global production of food grains is seeing a fall due to a number of reasons including rising temperature. India halted rice exports while Vietnam limited its exports. Rice prices in the international market increased by 15-20%. But we have not felt the heat due to a bumper production in the last Aman and Boro seasons."

"This year's Aman paddy is in the field now and its outlook is good. Besides, the government has passed a law to prevent illegal stockpiling, with punishment up to life imprisonment for hoarders. All in all, we are now in a much better position in terms of rice production and its prices," Jahangir Alam added.

Why rice price matters

The weight of food items in the consumer basket dropped to 48% with rice losing its share to 26% of food items in rural and 16% in urban areas due to changes in people's consumption patterns, according to the latest method of the Bangladesh Bureau of Statistics.

Dr Zahid Hussain, former lead economist of the World Bank's Dhaka office, told TBS, "Inflation could have gone up a lot if the rice price increased in line with other commodities. Due to the weight of rice in the consumer basket, an increase in the rice price will have a greater impact on inflation. And even with the price of rice remaining constant, 12% inflation means that the prices of other commodities have increased at a much higher rate."

Govt initiatives to control the market

Amid a global crisis, prices of all varieties of rice went down in Bangladesh slightly. Apart from good yields and a tougher anti-hoarding law, the government's initiative to the sale of five kg of rice at subsidised price to one crore families every month also played a role here, said traders.

According to Trading Corporation of Bangladesh (TCB) and Dhaka market data, the price of coarse rice is now Tk48-50 a kg, medium Tk55-60, and fine varieties Tk60-72, lower by an average Tk5 per kg or even more for fine varieties compared to the levels seen in June last year when rice prices had shot up.

At an event on 2 October, Agriculture Minister Abdur Razzaque said rice prices remain under control defying the commodity market trend. "We will not have to import rice this year because our production is good," he said.

Boro production was affected by floods and storms during the Boro season last year, which affected the market price. The government reduced the import duty allowing the private sector to import 15 lakh tonnes of rice at that time.

However, the rice market started to turn around late last year after the Aman yield started to hit the market.

Despite low rain, farmers had a better Aman harvest in the last season as the government ensured power and fuel supply for more than six lakh irrigation pumps. The price of rice began to stabilise with this year's Boro yield added to it.

Department of Agricultural Extension (DAE) said farmers have planted Aman paddy on more than the targeted area of land this year.

Dr Md Shahjahan Kabir, director general of the Bangladesh Rice Research Institute, said, "The production of food grains declined all over the world due to the effects of the Russia-Ukraine war. But it did not affect our production. With the application of agricultural technology and the support of our farmers, we now have surplus rice production. There is no shortage."

Besides, the government has about 16.22 lakh tonnes of rice and more than 1.5 lakh tonnes of wheat in stock this year.

A tougher anti-hoarding law

Parliament in April this year passed the "Production, Storage, Transfer, Transportation, Supply, Distribution and Marketing of Food Products (Prevention of Prejudicial Activity) Bill, 2023" with a provision of maximum life imprisonment for illegal hoarding of foodstuff.

Shahidur Rahman Patwari, vice-president of the Bangladesh Auto Major and Husking Mill Owners' Association, told TBS, "Production of Boro paddy was very good this year. Also, due to the government's tougher hoarding law, many people are now moving away from stockpiling paddy, which is playing a major role in increasing market supply."

"Previously, many traders in the village used to stock various products, including rice, wheat and mustard, to sell them at a convenient time at high prices. But now, not only rice prices but also wheat and mustard prices are falling due to this new law," he added.